The average credit card balance fell by a record 2.5 per cent in the year to February. The average credit card limit rose by just 1.4 per cent in the year to February – the slowest growth rate in 18 years.
What do the figures show?
- Figures released from the Reserve Bank show that the average credit card balance rose by $83.60 in February to $3,281.50. The average credit card balance is down by a record 2.5 per cent on a year ago.
- Of credit cards attracting interest charges, the average outstanding balance fell by $4.80 in February to $2,354.40. The average balance accruing interest is down 4.3 per cent on a year ago.
- The average credit card limit rose by $4.00 to $9,140.40 in February. The average credit card limit rose by just 1.4 per cent in the year to February – the slowest growth rate in 18 years.
- The number of credit card cash advances fell by 7.5 per cent in February after falling by 1.2 per cent in January (value fell by 1.3 per cent. In smoothed terms, credit card advances are down 4.5 per cent on a year ago and have consistently fallen in the past five years.
- Purchases made with credit cards rose by 2.9 per cent over the year to February. Purchases made with debit cards were up 10.6 per cent on a year ago.
What is the importance of the economic data?
- The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
What does it all mean?
- Despite the lift in consumer confidence over the past few months consumers are being particularly savvy when it comes to paying down debt. Credit cards remain on the outer with the average credit card balance falling by a record 2.5 per cent over the past year. Interestingly the result mirrors the business survey from earlier in the week – where a record 76 per cent of Aussie businesses claimed no requirement to borrow funds.
- Not only are credit cards out of favour, but also the average credit card limit was growing at the slowest pace in 18 years. And the shift to using existing cash facilities like debit cards has been a consistent trend since the GFC. No doubt consumers still harbour a degree of reservation about what lies ahead and as such households will keep a tight rein on finances.
- Over the past week there has been a patch of soft economic data. And the Reserve Bank is likely to point to the data in maintaining an easing bias on monetary policy. Interest rates are unlikely to be cut further but given the patchiness in the economy the Reserve Bank has no justification for removing the easing rhetoric anytime soon – especially given that inflation is well contained.
- There are few indications that consumers or businesses want to take on more debt. The aversion to debt is a major challenge facing banks, stymying revenue growth.